Labor reforms? Japan limits on part-timers please no one.

In Japan, labor reforms approved last Friday to protect temporary workers – now about one-third of the workforce – were met with criticism on both sides. Firms say they need a flexible workforce, while laborers say too many loopholes remain.

ByJonathan Adams, CorrespondentMarch 22, 2010

A man and cars are reflected on windows in Tokyo March 11. In Japan, labor reforms were approved last Friday to protect temporary workers.

Toru Hanai/Reuters

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Nagoya, Japan — Japan's center-left government approved a bill limiting the hiring of temporary workers Friday, in a bid to reverse years of labor deregulation that it says went too far in favoring big business at the expense of workers.

But the proposals have drawn fire from all sides. Businesses and some economists say firms need flexible labor to remain lean amid fierce global competition. Meanwhile, some workers and small unions argue that the reforms don’t go far enough.

It's been forced to retreat on several issues – scaling back a populist pledge to slash highway tolls, for example, and cutting in half its proposed child-rearing subsidy, from 26,000 to 13,000 yen ($145), at least in the first year of implementation.

Meanwhile, the DPJ cabinet's approval ratings have plunged to 34 percent, from around 70 percent when it took power, according to the latest poll from the Japanese daily Asahi Shimbun.

The labor bill is just the latest example of the DPJ's struggle to balance competing priorities while playing complex coalition politics.

"People are getting more and more frustrated about increasing inequality, and the DPJ has to take care of this national frustration," says Koji Murata, a professor at Doshisha University in Kyoto, about the labor bill.

"But this type of regulation may decrease Japanese companies' competitiveness. That's a Catch-22 for the Japanese economy."

Promises, promises

The measure fulfills a campaign pledge made by the DPJ during last summer's election campaign.

The bill approved by the cabinet Friday will ban "dispatch" work, or short-term contract work arranged through a third company, in the manufacturing sector. That rolls back liberalization measures in 2004 under the more business-friendly Liberal Democratic Party (LDP) government.

The new measures would also ban one-or two-day dispatch work contracts.

The bill now goes to the Diet, or parliament, where it is expected to pass within weeks.

Dispatch workers, along with part-time, subcontract, and other nonpermanent labor, now make up about one-third of Japan's 56 million-strong workforce.

The labor reforms are supported by Rengo, Japan's largest trade union confederation and a pillar of DPJ support. Most of its nearly 7 million members are permanent, full-time workers at big-name firms like Toyota and Panasonic.

But former dispatch workers, activists, and smaller unions representing temp workers say the changes won't take effect for three to five years, and that firms will easily find ways to sidestep the new measures.

‘Just in time’ workforce

As recently as the 1980s, Japan was famous for its social bargain. Salarymen gave firms long hours and unquestioned loyalty, and in return, companies took care of them for life.

Firms took on more part-time workers, dispatch labor, migrant labor from depressed regions like the northern island of Hokkaido, and foreign labor, especially Brazilians of Japanese descent and low-paid Chinese "trainees."

In 1999, 26 specialized sectors were allowed to hire dispatch labor, he said, and in 2004, dispatch work was allowed in manufacturing firms. Dispatch labor boomed, peaking at 2.2 million in 2007, only to plunge during the global recession as firms shed workers.

Mr. Iguchi called such dispatch labor a "just-in-time" workforce, complementing the famous "just-in-time" manufacturing model of Japan's corporate titans like Toyota. Workers are hired only when needed, and cut when orders are slack.

Such an arrangement has helped Japanese firms control costs. But it provides little security for workers, who are paid less and receive fewer benefits than permanent, directly hired employees.

Skeptical workers

At a union office in Japan's manufacturing heartland, one tousle-haired former dispatch worker, who did not want his name used, told a typical tale.

He worked for 6-1/2 years as a dispatch worker for Mitsubishi Electronics in Aichi Prefecture. He clocked 60-hour weeks and had the same responsibilities as permanent workers. But he earned less than half of what they made, only 1,120 yen (about $12.40) per hour.

Mitsubishi sometimes gave two or three dispatch workers permanent jobs, giving hope to the rest. "Me and my co-workers thought, maybe one day we'll be taken on, too," he says.

Instead, in December 2008 he and 40 other dispatch workers in his unit were summoned by Mitsubishi bosses and fired, with a week's notice. The recession had hit with full force and they were no longer needed; the unit's 20 permanent employees would stay on.

Now, he's supporting his wife and child with a job training allowance provided by the government, which he can receive for six months.

He and two other former dispatch workers have taken legal action against Mitsubishi. They're asking for 6 million yen ($66,000) each in compensation. They argue that under labor regulations, Mitsubishi was required to offer permanent employment after three years of work. Mitsubishi Electric declined comment, saying the case was still in litigation.

The worker says the DPJ's reforms don't go far enough. "They're no good," he says flatly. "People will still be able to be fired easily, and in practice nothing will change for workers like me."

The wrong solution?

Chie Matsumoto, a Tokyo-based labor rights activist, agrees. "There are other temporary employment systems in Japan that would still leave working conditions unstable," she says.

Iguchi, the labor economist, says firms will simply turn to other avenues of hiring nonpermanent workers. He says that improving unemployment benefits would have more impact.

The government should also enforce equal pay for equal work, he says, to close the wage gap between regular and "irregular" workers. He cites research showing that a full-time male worker in Japan typically makes more than three times what a part-time female worker makes for the same work.

"The idea that if you ban dispatch labor you'll have no 'working poor' – it's an illusion," he says.

But he says 70 percent of the dispatch workers fired during the recent recession were on monthly contracts, not daily ones. He called for better unemployment benefits, and said companies should be required to offer permanent employment to any temps who work for them for longer than a year.

"During the Koizumi government, the liberalization of labor rules created a very difficult situation for workers," says Mr. Kurematsu. "We were very happy to see that administration thrown out. But after six months [of DPJ-led government], we're less happy."

"We think the reforms are insufficient," he says. "They don't deal with the real problems."